Why the October Jobs Report Is Even Better Than It Looks

Bottom line: Whoever wins on Tuesday inherits an economy that is
still awfully weak and a jobs recovery that's clearly gaining momentum

Here's the lede you'll read in most newspapers today about Friday's jobs report: "The economy added a hearty 171,000 new jobs in October, and the unemployment rate ticked up to 7.9%."

Nothing about that lede is wrong, technically. But it's incomplete, for three reasons.

First, the BLS actually discovered 255,000 new jobs. The payroll survey, one of two used to produce this report, revised its jobs-added estimates in August and September by an additional 84,000, bringing August's total to 192k and September to 148k. For months, it looked like the unemployment rate was falling inexplicably fast. It turns out we were counting jobs added too slowly.

Second, and somewhat counter-intuitively, the fact that the unemployment rate went up is good news about today's economy. Calculated in a second survey of households by the BLS, the rate moved to 7.9% as more people entered the labor force. More people looking for work is good news, but when job seekers grow faster than jobs, the unemployment rate ticks up. The rising unemployment rate doesn't mean the economy is getting weaker. It means discouraged workers are feeling more encouraged because the economy is getting stronger.

Third, although every jobs report is subject to revisions, we're getting a clear picture of a strengthening recovery beyond today's headline. The margin of error for each jobs-added figure is 100,000 jobs. The BLS's initial estimate for August was 96,000. Then it was revised to 142,000. Now it stands at 192,000. So, should we ignore today's news? Not so fast. 170,000 isn't just October's first estimate. It's also our new three-month average. And it's considerably better than the year's average. Things are getting better faster.

Where is this new-look recovery coming from? It's coming from the beginning of a real housing recovery and the end of government austerity. In 2010 and 2011, the economy lost 477,000 public sector jobs. This year, we've added 20,000. That's made a huge difference.

"Everything about this report is great news" economist Justin Wolfers tweeted this morning. And he's basically right. But just as one bad report changes very little, one great report changes very little. Big picture: We've added about 3 million jobs since the economy started to recover in June 2009. But we're still down another 3 to 4 million jobs since the economy started to contract in December 2007. In 2012, we're creating 150-some thousand jobs a month -- the same as in 2011, with practically the exact same GDP growth.

Bottom line: Whoever wins on Tuesday inherits an economy that is still awfully weak and a jobs recovery that's clearly gaining momentum.